CBN’s July PMI in at 44.9 points, key sectors contract 3 months in a row

Charles Abuede

Central Bank of Nigeria’s (CBN’s) July manufacturing Purchasing Managers’ Index, an economic measure of the prevailing trends in the manufacturing sector, stood at 44.9 index points, indicating a contraction in the sector for the third straight month. Both May and June recorded 42.4 and 42.1 points respectively. The PMI index has a threshold of 50 percent.

The monthly survey conducted by the apex bank on 14 subsectors in the manufacturing sector revealed that out of the 14 sectors surveyed, transported equipment subsector reported growth above the 50 per cent threshold during the period under review, while the non-metallic mineral products subsector remained constant.

However, there was a contraction in the remaining 12 subsectors, namely, printing and related support activities; primary metals; fabricated metal products; paper products; food, beverage and tobacco products; chemical and pharmaceutical products; furniture and related products; electrical equipment; plastics and rubber products; petroleum and coal products; textile, apparel, leather and footwear and cement, all reported a decline below the 50 per cent threshold.

Production Level

At 44.7 points, the production level recorded for the sector declined in July 2020 for the third month back to back. One subsector recorded expanded production level, four stayed unaltered, while nine subsectors recorded decreases underway in July 2020.

New Orders

At 43.1 index points, the new orders recorded a decline for the third month back to back in the period under review. However, the new order developed by 6.7 points over the level recorded in June 2020. Two subsectors experienced growth, three stayed unaltered while nine subsectors recorded compression in the survey month.

Supplier Delivery Time

Similarly, the manufacturing sector’s supply delivery time index stood at 56.4 points in July 2020 showing a faster time of delivery for the third month in a row. Although 10 out of 14 subsectors surveyed recorded an improved delivery time, two reported unchanged points while the other two recorded a slower delivery time in July.

Employment Level

The employment level list for July 2020 remained at 40.0 points, showing a decrease in work level for the fourth back to back month. Out of the 14 subsectors surveyed, three subsectors stayed unaltered, while the other 11 subsectors recorded lower business level in the reported period.

On the other hand, the raw material Inventories at 43.2 points, contracted for the fourth month in a row, including July 2020. Three of the 14 subsectors recorded development in inventories, two stayed unaltered, while the staying 9 subsectors recorded lower crude material inventories in the survey month

Non-Manufacturing PMI Report

The non-manufacturing segment PMI remained at 43.3 points in July 2020, showing a contraction in the non-manufacturing division for the fourth sequential month. Although, from the 17 studied subsectors, two subsectors, arts, entertainment and recreation and transportation and warehousing, reported growth above the 50 per cent threshold in the survey month. The remaining 15 subsectors recorded decreases in the period under review.

Meanwhile, the level of business activity stood at 46.1 points in July 2020, indicating constriction in business activity for the third successive month. However, five out of the 17 subsectors announced development in business exercises in July 2020, while the remaining 12 subsectors recorded a decline.

This figure indicates that the economy has experienced bigger than expected contraction in the second quarter of 2020. However, as the economy grapples with the attendant effects of the global pandemic, coupled with the wobbling contraction of some key sectors, there is likely to be a continued constriction through the third quarter based on the current figure in the PMI.